Remember the letter to the TVA from Tennessee Congressmen Alexander and Fincher that asked some hard questions about Clean Line's Plains and Eastern Project?The TVA has responded, and it's not looking good for Clean Line! The letter, from TVA CEO William Johnson, is an exercise in reading between the lines, but here's my take on it, in a nutshell:Clean Line is not economic for the TVA and presents reliability issues.

The answers to Alexander's and Fincher's questions are:

1. Does purchasing electricity from this distance increase security threats to TVA'spower supply? Former U.S. Secretary of State George Schultz has said we shouldpay attention to generating more energy where we use it because of nationalsecurity risks.The power grid is a complex, interconnected network of generating plants,transmission lines, and distribution facilities. This system is designed withredundancy and resiliency at its core to ensure a reliable electric power system.Some increase in security risk is unavoidable as distance increases betweengeneration and point of use. The extra distance provides additional exposure fornatural or malicious events to force a transmission path out of service. The potentialfor an interruption with long duration to power supply increases if full transmission network redundancy is not provided or as greater amounts of supply are obtainedfrom more remote sources. The Department of Defense has become aware of thisrisk; it is implementing a program to make its major installations self-sustaining inenergy to mitigate the potential interruption from the grid.

Translation: Yes. The most reliable system is one where generation is located as close as possible to point of use. Long transmission lines increase the opportunities for equipment failure, natural disaster, or terrorist activity. Our military realizes this and has begun to island itself from the vagaries of our increasingly complex grid and long distance power shipments by building its own secure generation sources on site, which is known as distributed generation.

2. What is the cost of purchasing wind electricity compared to TVA generating orpurchasing other types of electricity generation?TVA is studying the addition of new wind energy resources as part of thedevelopment of its new Integrated Resource Plan (IRP). This process providesopportunity for public participation. When TVA evaluates the cost of wind energy,we include the value of the energy itself, as well as the cost to transmit out-of-valleywind energy to the Tennessee Valley. In addition, there are costs associated withthe intermittent nature of wind generation. Through the IRP, TVA will rigorouslycompare wind energy purchases against other alternative sources of energy(renewables, new and existing TVA generating assets, or purchased power) toserve local power companies and directly-served customers in a cost-effectivemanner.In FY2013, TVA's average fuel rates by asset type were as follows: nuclear,$6/MWh; coal, $32/MWh; and gas, $39/MWh. The TVA average system fuel cost,which includes hydro (no fuel cost) and purchased power, was $24/MWh. Bycomparison, off-system wind purchases were $80/MWh (including transmission).The cost of both wind and solar have trended steadily down in recent years. LazardFreres and Company, LLC, a leading financial advisory firm, does a periodic studyon the costs of renewable energy. Its most recent report states that the cost togenerate wind with the Federal production tax credit (PTC) is as low as $23 MWh;without the credit, the costs are as low as $45 MWh. (Note that these areproduction costs that do not take into account the cost of delivery to or the impact onthe TV A system.)

Translation: Wind is the most expensive resource in TVA's portfolio of resources. Wind without the PTC (and there currently is no PTC) costs $45 MWh to produce. In order to get remote wind into TVA's system, Clean Line will add transmission costs that the company previously pegged at $25 MWh, for a total of $70 MWh. This is a figure very generous to Clean Line, because it doesn't include any of the additional costs Clean Line is going to have to cover to pay for any necessary upgrades to TVA's transmission system to handle the injection of its generation. TVA's $80 MWh price for remote wind is probably pretty accurate. In addition, TVA says there are additional indirect costs due to wind's intermittent nature that must be considered. All of this number crunching will occur as part of TVA's Integrated Resource Plan, which is still in process. A decision on Clean Line is still a long way off.

3. There is substantial opposition in Congress to the wind production tax credit. WillTVA ratepayers be at risk of increased rates if the wind production tax credit is notrenewed?TVA does not benefit directly from the PTC. As noted in the prior response, thePTC has a material impact on the cost structure of wind developers and, in turn, theprice they can offer to TVA or other purchasers of the wind energy. Any TVApurchase of wind energy would be under a long-term contract that would place riskassociated with the tax credit on the seller.

Translation: That would be the wind farm's problem because any contract TVA would sign would be for a fixed price. If a lack of tax incentives makes building new wind farms uneconomic, then they won't be built!

4. What is the reliability of purchasing wind power as compared to other types ofelectricity generated by natural gas, nuclear, coal, or hydropower?Because wind is an intermittent resource that lacks some of the dispatch capabilityof other resources, it does not eliminate the need for base load or dispatchablepower plants like nuclear, natural gas, coal and hydropower. Adding intermittentgeneration resources like wind can be challenging to manage, particularly as thevolume of generation from those sources increases. Wind patterns are fairlypredictable, but not entirely so; in addition, weather and other factors can affectoutput. To maintain reliability, a wind energy purchaser must keep adequatecapacity and spinning reserves to cover the variability inherent to wind. Spinningreserve is typically calculated as the amount of capacity available to cover the lossof the largest generation source on the system. Utilities across the country havebeen integrating more wind into their systems over the last several years, and TVAalready integrates 1,515 megawatts of off-system wind power. The industry hasgrowing experience with this issue, but it does make ensuring reliability morecomplex.

Translation: Because wind is intermittent, it's not reliable. TVA would have to pay to have reserve generation available at all times to make up for wind's unreliability. In other words, buying wind would do little to shut down existing fossil fuel plants.

5. TVA's peak power demands tend to be between 4:00 p.m. and 7:00 p.m. and windtends to mostly blow at night. How does wind power fit into TVA's overall demandstructure if the electricity isn't being produced when TVA needs it the most?TVA analyzes historic and forecasted wind patterns to determine expected winddeliveries at our system peak. Our forecasting and planning processes reflectadjustment to wind generation at our summer peaks based on this analysis. CleanLine has told us that a production profile provided by the independent meteorologyfirm, 3Tier Oklahoma, shows that panhandle wind energy produces at about a 50percent capacity factor between the hours of 4:00 p.m. and 7:00 p.m., thuscontributing to meeting peak demand. TVA's current wind resources producedabout 25 percent average capacity factor over that peak period last summer, withsignificant variation each day (between 5 and 65 percent capacity factor). TVA willtake the seasonal and time-of-day energy patterns of wind into account whenevaluating adding additional wind energy to its portfolio.

Translation: Clean Line says its generation will be available 50% of the time, but reality and experience shows it will actually only be available 25% of the time, with extreme highs and lows. When there are lows, the lights could go out if there isn't enough reserve generation ready to go (spinning).

6. At a roundtable in September 2013, hosted by Senators Corker and Alexander, yousaid that TVA didn't need additional electricity generation capacity as the result ofreduced electricity demand. Has this projection changed?Electricity demand is not expected to return to 2007 levels until the end of thisdecade. We are projecting growth in demand of approximately 0.6 percent per year,net of TVA's energy efficiency efforts. TVA believes that we have adequatesupplies to meet the near- to mid-term energy needs of the Valley reliably. Cleanerenergy sources, including nuclear, renewables, hydro and energy efficiency, providediversity within TVA's existing balanced energy portfolio. TVA is evaluating futurepower needs and opportunities to meet them through the IRP. Wind and othergenerating resources are regularly evaluated against existing or planned assetadditions to address changing conditions.

Translation: Demand has tanked and is not expected to recover.

7. If the projection for TVA's electricity demand has changed since September 2013,does it make more sense to purchase this wind power from Clean Line EnergyPartners, to build additional nuclear capacity, or to build additional natural gas orcoal capacity?While demand over the next decade or so is predicted to be stable with low growth,the TVA generation fleet is in transition. TVA has retired or will retire a substantialportion of its coal fleet; we are committed to the completion of Watts Bar NuclearPlant Unit 2 and to a large new gas combined cycle plant in Paradise, Kentucky.We have the potential to get incremental megawatts from the hydro system and asignificant amount from power uprates in the nuclear fleet. We have to eitherretrofit, retire, or replace the Allen Plant in Memphis before 2019 under the terms ofan agreement with EPA and others. (Clean Line cannot supplant Allen because ofthe need for a generation source physically located in that area to providetransmission support that imported wind generation cannot provide.) In addition,other market participants have approached TVA with expressions of interest toprovide electricity from gas, nuclear, wind and solar assets. TVA also factors inenergy efficiency and demand response programs into its resource decisions. Therecently announced draft 111 (d) rule from EPA, if enacted in its current form, willalso have a national impact on future decisions.Clean Line will be evaluated in this context of low growth, transitioning fleet andother options by application of the statutory mandate and guidance noted in thepreamble of this letter.

Translation: In a word, no. Clean Line isn't even a useful substitute for generation from coal plants that TVA is planning to close. There are plenty of other resources available.The rest of the questions deal with eminent domain questions, which TVA could have batted away entirely because TVA will not participate in those activities. However, TVA answered each question with, "Clean Line said...." and repeated the same old carefully crafted lines about "voluntary acquisition," continued use of the properties for farming and ranching, and compensation in accordance with Clean Line's paid-for market value studies. Read these answers using a falsetto voice for the things Clean Line said and you'll get a better appreciation for TVA's tongue-in-cheek repetition of Clean Line propaganda.Bottom Line: Clean Line needs to look elsewhere for customers for its Plains & Eastern payload.

Speaking of TVA and distributed gen and EE and how it plays into their Integrated Resource Plan (IRP)... If you already haven't done so (since you work for them now) - see the May 29 working group meeting slide deck here....
http://www.tva.com/environment/reports/irp/index.htm

Reply

Keryn

7/18/2014 03:55:12 am

Thanks, Cap'n. It's so hard to keep up with what my peons have been doing :-)

Reply

Keryn

7/18/2014 04:00:04 am

And, BTW, Cap'n., since you seem to know so much about resource planning, do you have a different take on the TVA letter? I'd love to hear it.

Reply

Captain T1:15

7/18/2014 05:09:35 am

No. Your interpretation, as well as the letter, was pretty clear.... except for your comment:

"Translation: Demand has tanked and is not expected to recover."

The letter talked about a steady, albeit small, growth rate in demand net of energy efficiency efforts. I would not have used the word "tanked". Yes demand dropped a bit due to the 2008-2009 recession, as it did across the country*, and the letter stated that they expect demand to slowly recover to 2007 levels by 2020.

* This is one of the reasons that your Stop PATH efforts were successful.

Reply

Keryn

7/18/2014 05:24:34 am

Thanks, Cap'n. I guess we'll have to agree to disagree on the reason for demand dropping off. But, you are correct, the TVA letter didn't say that... that was my spin. I think that as we move forward, energy efficiency demand management and distributed generation are going to have a more profound effect than planners are recognizing. Although, since planners aren't supposed to make mistakes that leave us in the dark and can't depend on hopes and dreams, they need to plan generously. I'm okay with that. I reserve the right to say... "I told you so" 20 years from now ;-) Because we'll both still be here, right?

Reply

Captain Trips

7/18/2014 05:38:34 am

No. I'll be dead in 20 years.

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Keryn

7/18/2014 06:01:39 am

Well, I plan to haunt you through eternity as well. :-)

Captain

7/18/2014 06:06:12 am

Thank you!

Reply

Keryn

7/18/2014 06:10:38 am

I'll be the person with the pitchfork (as you might have guessed!)

Reply

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About the Author

Keryn Newman blogs here at StopPATH WV about energy issues, transmission policy, misguided regulation, our greedy energy companies and their corporate spin.In 2008, AEP & Allegheny Energy's PATH joint venture used their transmission line routing etch-a-sketch to draw a 765kV line across the street from her house. Oooops! And the rest is history.

AboutStopPATH Blog

StopPATH Blog began as a forum for information and opinion about the PATH transmission project. The PATH project was abandoned in 2012, however, this blog was not.

StopPATH Blog continues to bring you energy policy news and opinion from a consumer's point of view. If it's sometimes snarky and oftentimes irreverent, just remember that the truth isn't pretty. People come here because they want the truth, instead of the usual dreadful lies this industry continues to tell itself. If you keep reading, I'll keep writing.